Following the recent elections, South Africa is in a phase of coalition talks, aiming to establish a new government by June 17. The African National Congress (ANC) witnessed a decline in its majority, securing 40.2% of the vote, which has led to speculation about potential coalition scenarios, including partnerships with the Economic Freedom Fighters or the newly established uMkhonto weSizwe party.
The market's response was initially volatile, with the rand experiencing a significant increase and South Africa's dollar bonds and the FTSE/JSE All Share index showing strong performances. Discussions on a coalition with the Democratic Alliance are perceived with cautious optimism, considering the potential impacts on asset prices and the South African risk premium. Finance Minister Enoch Godongwana emphasized the ANC's commitment to prudent coalition choices to ensure economic stability. The sovereign-risk premium of South Africa showed signs of easing, reflecting the market's evolving sentiment towards the coalition outcomes.
Source: bnnbloomberg.ca